Global Economy

The ebbs and flows of global economic conditions, trade and capital flows, thus have substantial implications for the Australian economy, and Australia’s major regional trading partners. Understanding the broad trends, and identifying emerging challenges and opportunities within the global economy, is central to the work of the International Economy Program at the Lowy Institute.

The highly integrated nature of the modern global economy became especially evident during the 2008 global financial crisis. What began as a localised problem within the residential asset-backed securities market in the United States, eventually brought down major financial firms across the Western world, and ultimately pushed the United States and Europe into a deep and prolonged recession. Although global economic growth has recovered somewhat since 2008, it is still much lower than pre-2008 trends, and the hangover from the crisis has manifested itself in the form of high unemployment levels throughout much of the developed and developing world, as well as an increasing level of inequality both within and between countries.

Understanding the economic rise of Asia, and particularly of the growing middle class within Asia, is also crucial to the broader work of the Lowy Institute. Political economy analysis on major players in the region, chiefly China, India and Indonesia, features heavily in the work of the East Asia Program and the International Security Program.

Deal or no deal
Global trade experts meeting in Australia this week have expressed some confidence that an interim deal will be reached by the end of the month.
As markets swoon amid the latest rumours about US-China trade negotiations, global trade experts meeting in Australia&

It is almost half-a-century since economist James Tobin proposed a small transaction tax to stabilise volatile global capital flows.
Tobin’s proposal followed the breakdown of the Bretton-Woods fixed exchange rate system in 1971. A tiny once-off transaction tax wouldn’t have much effect on

After Jim Yong Kim resigned last month, President Donald Trump indicated he intends to nominate senior US Treasury official David Malpass to lead the World Bank. Under an unofficial agreement, the World Bank President always comes from the United States. Although the multilateral development

The US-China trade war is viewed by many as a dark cloud over the global economy. So why is Australia’s ambassador to the US, Joe Hockey, seemingly urging Trump to go harder, and not settle for a “pyrrhic victory” that fails to resolve long-term differences between the US and China?
In

Bilateral trade’s birthday
Australia’s tentative first steps into the world of the bilateral trade deals – which now tend to dominate the trade agenda – are revealed in the first cabinet papers from the Howard government, released on 1 January.
The Coalition had talked up the idea of a

In 2018, Xi Jinping seemed to be in an almost unassailable position in Chinese politics. China’s president started the year with the sort of political power that few since Mao have enjoyed, with what was seen as an emphatic victory for him at the 2018 National People’s Congress for his proposal

“Winter is coming” warned Indonesian President Joko Widodo in his address at the October meeting of the International Monetary Fund and World Bank Group in Bali. He wasn’t talking of Game of Thrones feuds but instead was warning about the global economic outlook. Many commentators seem to

To TPP or not
It might sound like a voice from the vault, but the New Year has begun with a fresh round of will-they or won’t-they about additional membership of the revamped Trans-Pacific Partnership (TPP).
Australia’s newish Assistant Minister for Trade, Tourism and Investment Mark Coulton&

While China still uses the rhetoric of “reform and opening up” its financial system remains relatively closed and is set to get even more unfriendly for foreign investors despite some recent announcements on liberalisation.
The recent news that China continues to delay access by Visa and

Will Ivanka Trump become the next World Bank President? There is speculation that the President’s daughter is among the names thrown into the mix to replace the current president, Jim Yong Kim, who recently announced his departure.
The idea of Ivanka Trump taking over as head of the World Bank

Jim Yong Kim, president of the World Bank, has announced that he will retire. This is far earlier than expected. Jim Kim was first appointed in 2011 and was re-elected in 2016 for a five-year term, due to end in 2022.
The president of the World Bank is, in effect, the Pope of the official

British think-tank, the Henry Jackson Society, recently released its Audit of Geopolitical Capability, which it describes as providing the “fullest picture of who’s up and who’s down on the international stage”.
According to the 2019 audit, Australia was up, ranked eighth in terms of

In recent months, the US-China relationship has accelerated from rivalry toward adversarial antagonism. In the US, a policy shift on China has been propelled by a sense that China is winning and America is losing in a competition for global hegemony.
“I want tariffs,” Donald Trump&

Geo-economics arrives
When former US president Barack Obama last tried to reshape Asia in 2016, he embraced the traditional language of liberal multilateralism and talked of writing the rules for the 21st century in the Trans-Pacific Partnership.
But when Vice-President Mike Pence landed in

The administration has recognised that the true challenge China presents is not fundamentally one of a rising power threatening to replace an established power. Instead it is the challenge that China poses to the fundamental principles embraced by market democracies globally: free trade and open

This article is based on episode 10 of the Good Will Hunters podcast, featuring an interview with Clare Press, sustainability editor-at-large at Vogue Australia.
It’s known as “fast fashion”, clothes cheap to buy, yet costly to make, if the true labour and environmental

This truce is by no means the end of trade tensions between China and the US.
Over what was undoubtedly a delicious dinner last Saturday night on the sidelines of the G20 meeting in Buenos Aires, US President Donald Trump and Chinese President Xi Jinping agreed to extend the deadline for the

The theme for the upcoming G20 Leaders Meeting to be held in Argentina is “Building Consensus for Fair and Sustainable Development”. As the “premier forum for international economic cooperation”, the G20 brings together advanced and emerging economies to, among other things, improve the

Plan B for Indonesia
An interesting division is emerging between the federal government and a potential future Labor administration over the value of free trade agreements (FTAs) with implications for future relations with Indonesia.
With the new Trade Minister Simon Birmingham inheriting

With the US–China economic rivalry intensifying and “decoupling” becoming the mantra in Washington, what mindset, or economic model, is behind President Donald Trump’s response to China?
Trump is a Republican, but not as we know them. Republicans favour free international trade,

The Asia-Pacific Economic Conference (APEC) Summit is being held at a time of enormous global and regional geopolitical uncertainty.
It is a tumultuous time for the region, and APEC 2018 provides a real opportunity for leaders to agree on the kinds of reforms that could make a positive difference

It’s hardly surprising that America – the land of Thomas Edison, Graham Alexander Bell, and Steve Jobs – is a vigorous defender of inventors’ rights. President Trump has turned up the heat on the long-standing concerns about intellectual property ‘theft’ by foreigners, especially China

The conviction that the interests of the US and China are fundamentally incompatible is gathering weight in Washington, as a consensus for confrontation with Beijing takes hold. Having progressively raised tariffs against Chinese-made goods, and adopted reports declaring that China’s “economic

Out of the dark
It says a lot about the dilemma of managing China and infrastructure that the federal government has signed three agreements* on the issue in the past year without revealing any more detail than the Victorian government has over its hasty Belt and Road Initiative (BRI)

This week’s Economist magazine features Australia on the cover with the caption: “Aussie Rules: what Australia can teach the world”. Inside, the text is effusive: Australia is “the wonder down under”, “possibly the most successful rich country”.
How times (and predictions) change!

The TPP, the biggest and most controversial trade deal in recent decades, has just passed the Senate in Australia with bipartisan support. Despite its speedy confirmation, the TPP warranted more serious scrutiny than it was afforded.
While for its proponents, the TPP is a “gold standard” “

Bonsai diplomacy
Australia’s China-befuddled political class could do worse than observe how the world’s leading centre-right politician Shinzo Abe manages a masterclass in “bifurcated hedging” when he arrives in Beijing today.
The Japanese Prime Minister will be trying to rebuild old

Successive federal governments have declared Australia to be an “energy superpower”. The 2017 Foreign Policy White Paper is the most recent example, highlighting the size of Australia’s exports of coal and liquefied natural gas.
Yet Australian foreign policy has often overlooked energy

Saudi Arabia was the first country Imran Khan visited after assuming office as Pakistan’s new Prime Minister. As he made the trip last month, he asked for financial help for Pakistan’s turbulent economy.
Soon after his return, it was announced that Pakistan had invited Saudi

One of the few things economists agree on is that international trade should be free of restrictions. Hence we know US President Donald Trump’s tariffs are a bad idea. But just how much damage will they actually do?
Trade experts, understandably, are inclined to get excited over tariff increases

The continued legitimacy of the Chinese government under President Xi Jinping, as it was with former president Hu Jintao, depends on two main pillars: improvements in people’s material wellbeing and a strong sense of national pride. The notion that the government will improve the Chinese people’

Outward bound
Australian businesses are confident about foreign markets despite the threat of a global trade war and doing it without the need for new digital commerce channels to find customers.
These are the two striking findings from the latest Australian International Business Survey&

Gita Gopinath has been appointed as Chief Economist at the International Monetary Fund, to take over from Maurice Obstfeld at the end of the year.
She is academically well-qualified. The job, however, is not just about academic economics. The IMF is like a priestly order, with established

Geopolitics may be rapidly moving to the forefront in deciding how the US-China trade war will play out. If so, the odds of a rapprochement are dwindling fast.
The trade conflict has always been about many things, clouding how different analysts understood it. Initially, it seemed best understood

National debt in Pakistan has soared past US$92 billion and its servicing costs are projected to reach 30% of the federal budget.
The current economic crisis in Pakistan poses political trade-offs between supporting economic growth, protecting domestic consumers, and meeting external obligations.

What’s in a name? According to US President Donald Trump, it is the difference between the “worst trade deal ever made” – as he called the North American Free Trade Agreement (NAFTA) – and a “wonderful new trade deal” – his reference to the United States-Mexico-Canada Agreement (

First mover advantage
Indonesia says Australian education and training institutions will still have an advantage in setting up there even though the recent bilateral trade deal negotiations have actually opened the country to education exporters from all around the world.
Indonesian investment

Capital has been flowing out of emerging economies around the world, causing currencies and financial markets to fall. While tightening global liquidity was the initial catalyst, the threat from Donald Trump’s trade war and fear that "contagion" might spread from Turkey and Argentina have added

Drought is an unavoidable hazard of farming in Australia. As the economic pressure mounts from the current drought in northern New South Wales and Queensland, there is increasing stress on farmers in the region, including in the dairy industry.
The federal government has stepped in with

Food for thought
In 2009 Japanese businessman Masaki Harada used a Lowy Institute appearance to outline some frank and ambitious plans for his company Kirin in Australia, in what was quickly interpreted as more than a usual business plan.
It was an exciting time for the Australia-Japan bilateral

Trade has been ground-zero for US President Donald Trump’s brand of geoeconomics, so it’s a good place to start evaluating his impact.
Intrinsically, getting agreement on international rules is hard work: even where participants benefit from the clarity and certainty of rules, they have

In the four decades that have followed China’s initial stage of post-Mao “Reform and Opening Up”, the world has learned to expect great things from the Middle Kingdom’s centrally-planned economy. It has established itself as the low-end “factory of the world” and orchestrated an

Next month marks the tenth anniversary of the failure of Lehman Brothers – the nadir of the 2008 global financial crisis. Not only was there a substantial fall in GDP in most countries (although not in Australia), but the recovery since then has been slow. GDP just about everywhere is

Like countries, academic fashions rise and fall. The current interest in geoeconomics – using economic power and leverage to pursue geopolitical goals – is classic example of this possibility. It is no coincidence that the rise of geoeconomics mirrors the rise of China. Rather revealingly, no

US still rules
It might not fit with the increasingly nationalist public debate, but detailed new numbers on the size of foreign-owned businesses in Australia suggest they have not changed dramatically since the turn of the century.
This is the first time in 15 years the ABS has

Such is the excitement about China’s role in Asia that the mere whiff of anything to do with the Belt and Road Initiative (BRI) is enough to cause a media flurry in Canberra. It happened again a few days ago.
Two pieces of news triggered headlines about the BRI in the Australia media.